In the recently released Notice 2013-14, the IRS provided a bit of relief for employers who wish to take advantage of the Work Opportunity Tax Credit (WOTC), which was retroactively extended by the American Taxpayer Relief Act of 2012 (ATRA). Employers now have until April 29, 2013, to file the qualified employee certification form with their state employment security agency (designated local agency, or DLA).
The WOTC offers tax credits of $1,200 to $9,600 to organizations that hire employees from certain target groups, which have been identified to help improve their economic situation. Through the years, such groups have included veterans, youths, and individuals living in certain areas, among others. In 2012, the credit applied only for the hire of qualified veterans, and that provision expired on December 31, 2012.
ATRA extended the WOTC through the end of 2013 for taxable employers hiring individuals in groups defined in Section 51(d)(1) through (d)(10) of the Internal Revenue Code, including qualified veterans. The provision applies retroactively for target groups that were not originally covered in 2012 (i.e., non-veteran groups), including individuals age 18 to 39 who have received food stamps for a certain period of time prior to the hire date, individuals age 18 to 39 living in federally designated Rural Renewal Counties or Empowerment Zones, and ex-felons, among others. Note that for tax-exempt employers, the 2013 extension applies only to newly hired qualified veterans.
In order to claim the credit, employers must receive a certification from their DLA that the individual is indeed a member of a qualified group. To receive the certification, Form 8850, the “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” must typically be completed and submitted to the DLA within 28 days of the new hire’s first day on the job.
Welcome relief, but unanswered question
After the welcome extension was granted as part of ATRA, one important question remained: How does an employer meet the 28-day certification requirements for new hires brought on board in 2012? IRS Notice 2013-14 cleared up the confusion. The notice states that for all individuals in the non-veteran target groups hired between January 1, 2012, and March 31, 2013, and for qualified veterans hired between January 1, 2013, and March 31, 2013, employers now have until April 29, 2013, to submit Form 8850. After April 29, the 28-day rule will be reinstated.
Employers with questions about the WOTC should speak with their tax advisors.